STAND. COM. REP. NO. 1039

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1026
                                        H.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Government Operations and Housing, to
which was referred H.B. No. 1026, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO INSURANCE PREMIUM TAXES,"

begs leave to report as follows:

     The purpose of this measure is to allow insurance companies
to offset their insurance premium taxes with the low-income
housing tax credit provided by Section 235-110.8, Hawaii Revised
Statutes.

     Testimony in support of this measure was received from the
Department of Taxation, the Housing and Community Development
Corporation of Hawaii, and Affordable Housing and Homeless
Alliance.  The Tax Foundation of Hawaii provided comments.

     Currently, resident taxpayers, banks, and financial
institutions may take the low-income housing tax credit by
deducting from their net income tax liability, a credit equal to
thirty percent of the applicable percentage of the qualified
basis of each low-income building located in Hawaii.  
     
     Your Committee finds that this measure would encourage the
inflow of capital into Hawaii by providing insurance companies
the same incentives enjoyed by individuals and financial
institutions to invest in low-income housing projects.
     
     Your Committee finds that allowing insurance companies to
utilize the tax credit will increase demand for such credits,

 
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                                   STAND. COM. REP. NO. 1039
                                   Page 2


which will result in investors paying a higher price for the
credits.  The higher price paid for the credits would result in
the Housing and Community Development Corporation of Hawaii
having to award less tax credits to low-income rental projects
and would therefore "stretch" the credits further and provide an
increased amount of low-income rental units.  In addition, the
total amount of the credit claim will not increase since it is
fixed by federal law.

     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 1026, H.D. 1, and recommends that it pass
Second Reading and be referred to the Committee on Ways and
Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
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